When taxation turns on form over substance, distortion—not development—drives innovation.
India’s ride-hailing ecosystem, once hailed as a beacon of platform-driven mobility, is now grappling with a legal and policy crisis of classification. The root of the crisis is deceptively simple: two different GST treatments for the same end service—urban transportation—based solely on the platform’s business model.
This fault line between commission-based cab aggregators (e.g., Uber, Ola) and Software-as-a-Service (SaaS)-based platforms (e.g., Namma Yatri, Rapido) has widened into a chasm of pricing asymmetry, legal uncertainty, and tax inequity—all under the umbrella of the GST framework.
As the Central Board of Indirect Taxes and Customs (CBIC) deliberates on this issue and the Karnataka High Court presses for clarity, a pivotal question emerges:
Can tax law permit arbitrage in the name of innovation?
I. The Two Models: Divergent Mechanics, Converging Purpose
1. Commission-Based Model (e.g., Uber, Ola)
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The platform earns a percentage commission from each fare.
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The ride fare is billed to the passenger, who pays 5% GST (without ITC) or 12% (with ITC).
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GST liability is discharged by the platform under Section 9(5) of the CGST Act.
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Full control over:
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Fare pricing
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Driver allotment
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Customer support
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Grievance resolution
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2. SaaS-Based Model (e.g., Namma Yatri, Rapido)
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The platform offers technology infrastructure on a subscription basis (e.g., ₹25/day).
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No GST is charged on ride fares; only 18% GST is levied on the subscription fee.
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The driver is treated as a service provider, but no GST is actually collected from passengers.
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Minimal platform control over fare negotiation or allocation.
Common Outcome: Passenger receives a ride from point A to B.
Divergent Tax Outcome: Fare taxed under one model, not under the other.
II. Section 9(5), CGST Act: A Legal Provision Under Strain
The Text:
“...in respect of such categories of services as may be notified... the tax on such supplies shall be paid by the electronic commerce operator if such services are supplied through it.”
The Issue:
What does “supplied through it” mean? Does enabling a driver to connect with a passenger through an app amount to “supplying” the service?
Legal Ambiguity Unfolds:
| Platform | Model Type | GST on Fare | AAR/Court Verdict | Reasoning |
|---|---|---|---|---|
| Uber India | Commission | Yes | Liable under Section 9(5) | Full operational control over fare, booking, and customer interaction |
| Rapido | Commission | Yes | Liable | Ride facilitation + fare control = aggregator role |
| Namma Yatri (Juspay) | SaaS | No | Not liable (AAR Karnataka) | Platform merely provides software; doesn’t manage transport services |
| MYn (Multiverse) | SaaS | No | Not liable (AAR Karnataka) | No fare control, no ride management—only backend SaaS support |
III. Policy Consequences: A Tax Arbitrage in Plain Sight
1. Pricing Distortion
Passengers using SaaS platforms pay no GST on the ride. Commission-based platforms, by contrast, must collect and remit GST. Result?
A 5–12% cost difference on the same service, based not on technology but tax arbitrage.
2. Revenue Leakage
As the SaaS model gains traction, the exchequer risks losing GST from thousands of daily transactions. If drivers and passengers transact directly—with no tax—black box economics become entrenched.
3. Compliance Discrimination
Commission platforms:
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Face 9(5) liability
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File GSTR-1 and GSTR-3B with high volume
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Bear the burden of audits and scrutiny
SaaS platforms:
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File GST returns only on subscription fee
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Escape ride-level scrutiny
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Avoid e-invoicing for rides
4. Erosion of Competitive Neutrality
The “equal service, unequal tax” structure incentivizes platforms to choose models based on tax savings, not on consumer value or safety infrastructure.
This harms:
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Well-regulated platforms
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Investors expecting policy stability
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Startups trying to compete on product, not tax structuring
IV. Judicial Intervention: Karnataka High Court’s Wake-Up Call
In W.P. No. 13850/2023, the Karnataka High Court explicitly observed:
“When two platforms enable the same service but attract different tax obligations, regulatory parity becomes imperative for market fairness.”
It directed CBIC to:
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Conduct stakeholder consultations
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Make policy recommendations to the GST Council
This elevates the issue from a compliance grey area to a national tax jurisprudence moment.
V. The Way Forward: Legal Reform Options
| Option | Mechanism | Implications |
|---|---|---|
| 1️⃣ Clarify Section 9(5) via amendment | Add explanation for "supplied through" | Anchors liability in control/facilitation, not just model form |
| 2️⃣ CBIC Circular under Sec. 168 | Issue administrative interpretation | Offers immediate relief but vulnerable to judicial challenge |
| 3️⃣ Mandate uniform ride-level GST | Require all platforms to report and remit GST on rides | Restores competitive neutrality and plugs revenue gaps |
| 4️⃣ Hybrid treatment by threshold | Classify based on platform role, not revenue | May introduce complexity and litigation over classification tests |
VI. The Bigger Picture: Tech Policy Meets Tax Morality
This dispute is not just about GST. It touches the core of how India regulates platform economies.
Key questions policymakers must address:
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Should form override substance in tax law?
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Can platforms dodge regulatory obligations by disaggregating control while achieving the same outcome?
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Should rider safety, price transparency, and dispute redressal be traded for tax savings?
Tax policy must never become a tool to avoid accountability.
If a platform enables the ride and earns from it—directly or indirectly—it must carry the same tax and legal responsibilities.
VII. Conclusion: One Nation, One Tax—One Rule for All Rides
India’s GST regime is at a critical juncture. What began as a tool for simplification must not devolve into a playground for tax arbitrage.
To uphold its founding principles of neutrality, fairness, and equity, GST law must treat like services alike—irrespective of model camouflage.
The journey may begin with an app. But if the destination is the same—a paid ride—then the tax treatment must follow the service, not the software.
The onus now lies with the GST Council to deliver a uniform framework—one that preserves innovation, ensures fair play, and reinforces tax justice in India’s gig economy.
Legal and Policy References
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Section 9(5), Central Goods and Services Tax Act, 2017
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Juspay Technologies Pvt. Ltd., Order No. KAR ADRG 12/2024
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Multiverse Technologies Pvt. Ltd., Order No. KAR ADRG 04/2024
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Uber India Systems Pvt. Ltd. v. Union of India, W.P. No. 13850/2023 (Kar HC)
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CBIC internal policy discussions as reported by CNBC-TV18, June 2025
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GST Council deliberations and Circulars (awaited as of June 2025)
